Regional Economic Growth - The opportunity for Bangladesh

Every part makes the whole and together the whole is more than the sum of its parts. It is the main concept of regional economics. Why is being part of the whole in crucial? It is because every parts build up the whole. What if I lose my hand? I might survive but with unbearable sufferings. The same happens to economy. If any parts of the economy is lagged or left vulnerable, the whole economy pays the price for it. Because every economy is comprised of different many parts where economic activities takes place. Below capacity performance of certain sector(s) pulls back the total economic performance.

The basic question of regional economics is why does economic activity take place where it does? Why not in other places? The answer is simple. Every duck knows where water is. The economics of regions thus appear. It places great emphasis on factors of production, natural resources, production facilities (water, gas, electricity), human capital, location of production and consumption, transportation costs, and the importance of spatial (relating to specific regions) relationships of among economic activities. Regional economics is the study of urban areas or regions based on the consideration of space, transportation cost, and location in production and consumption. This field includes a wide variety of topics, including the migration of labor, the macroeconomic activity in communities, cities, counties and states, and the location choices of firms.

In the case of global economy, each economy becomes a part of the global economy. Thus any economy being a part of the whole can harness huge opportunity and growth possibility.

Relevance to Bangladesh:

Bangladesh has been on growth trajectory for last couples of years and it is one of the leading growing economy of South Asia. It has averaged more than 6.5% GDP growth over the last five years. With the opportunity and capacity to ensure more growth, Bangladesh can now make strategic plans and use policy tools for regional economic development for economically important regions (EIRs). To explore and achieve growth in unexplored regions, we see huge existing opportunity. Regional integration by roads or inland water ways can play vital roles to increase more economic activities in distant regions of the country. Regional integration in international level also shows tremendous potentials in South Asia. The biggest initiative of its kind taken by any single nation in the world, China's " One Belt One Road " (OBOR) initiative to connect China and Europe and rest of the Asia is an example of regional integration that will unearth huge opportunity to attract more investments to China and participating countries. Likewise, Bangladesh can attract foreign investments by participating other regional integration programs like Bangladesh-China-India-Myanmar (BCIM), Bangladesh-China-India-Myanmar corridor (BCIM) and Bangladesh-Bhutan-Nepal-India (BBNI). Geographical location of Bangladesh is tremendously important for regional integration from which Bangladesh can take as many advantages as possible depending upon capacity.

Opportunity of Growth:

Bangladesh has both opportunities to achieve more growth in national and international level. Regional integration of different regions based on specialized economic activities like fisheries and shrimp production in southern parts, teak production and horticulture northern parts can boost growth by creating employment opportunities. Several economic hubs can be set up for supporting and encouraging such endeavors at macro and micro levels. This will leave positive socio-economic impact on our economy.

Geographically, Bangladesh can be a connecting corridor between semi-industrialized ASEAN countries and the highly populated Indian sub-continent. It is strategically located between South Asia and South-East Asia which makes it a very important player in trans-regional integration.

The Bay of Bengal is rich in natural resources and embraces both South and East Asia. Although a number of regional groupings like Bangladesh-China-India-Myanmar (BCIM) and Bangladesh-Bhutan-Nepal-India (BBNI) partially cover the region, it is the Bay of Bengal Initiative for Multi-Sectoral, Technical, and Economic Cooperation (BIMSTEC) that covers the entire region and provides a framework for regional economic integration. BIMSTEC accounts for US$ 2.7 trillion GDP, 21 percent of global population (1.3 billion population) and 7 percent of intra-regional trade. BIMSTEC provides South Asian countries a conduit for economic cooperation with East Asia countries and a link to East Asian production networks and value chains.

Bangladesh is part of the proposed Bangladesh-China-India-Myanmar corridor (BCIM), one of the six corridors of OBOR. China has already shown interest in developing a deep sea-port in Bangladesh under the 21st century maritime Silk Road initiative. Memoranda of Understanding (MOU) have also been signed with China to build several components of the Paira deep sea-port. Now is the time to brings investments home. Bangladesh has the potential to leverage its geographical advantage through this initiative. China plans to invest up to USD 4 trillion in OBOR-related projects in the next few decades. With proper policy co-ordination, Bangladesh can attract a large share of that investment.

China is seeking to export its surplus industrial capacity abroad for the smooth transition into a developed economy. For that, China is looking for cheap labor and highly productive economies for long-term investment. A large population, coupled with our advantageous geographical position, thus makes Bangladesh a perfect candidate for that. Using our cheap labor competitive advantage, we can absorb the benefits.

Challenges Ahead:

Lack of proper and state-of-art policies to support and derive opportunities from such regional integration. Moreover, our financial system to absorb such large amounts of investment is not fit on full scale. Large-scale loans might affect macro-economic stability. Second, Sino-Indian rivalry might jeopardize Bangladesh’s prospects. India has already boycotted OBOR over Chinese involvement in the China Pakistan Economic Corridor (CPEC), which, according to India, violates its sovereignty. Along with Japan, India has expressed its intention to resist OBOR. Given India’s clout in South Asia, it might delay or disrupt OBOR related projects in the region.

Conversion of “soft loans” pledged to Bangladesh into commercial credits later is a matter great concern. If disbursed as commercial credits instead of a government-to-government basis (G2G), the loans could be very costly for us and could cause a long term debt crisis. Therefore, before making agreements, policy to utilize loans to develop infrastructure and power and energy sector shall be there.

Political issues in between China, Bangladesh and India are quite critical. Both India and China are important trading partners of Bangladesh, and favoring one over the other could get in the way of Bangladesh’s national interests. However, OBOR is offering an opportunity for Bangladesh to integrate with the international market. Bangladesh must embrace reforms in economic and policy aspects in order to successfully achieve the objectives of OBOR.

Most importantly, capacity building is a must. To bring foreign investment in Bangladesh, careful management and supporting policies should be put into play. OBOR alone offers a total of USD. 21.50 billion investment in Bangladesh. To manage such huge foreign investment requires sophisticated skills and policy, framework and technical assistance.

Policy Initiatives:

Bangladesh has some points and policies to develop in order to accommodate foreign investments by regional integration and cooperation. With due political consideration and serving best the nation's interests, policies should be formulated. Both transportation and infrastructure sector as well as power and energy sector have huge opportunities to attract more and more investments. Besides, to ensure inclusive regional economic growth, Bangladesh can make policy initiatives at district or division level to bolster economic activities. That will make our economy base stronger and sustainable.

At international aspect, both China and India have shown their interests to invest in these sectors. To make best use of the investments, finely tuned and state-of-art policy is required. Looking back we see when BIMSTEC started, India's “Look East” policy coincided with Thailand's “Look West” policy and there was much enthusiasm to drive the organization by these two member countries to integrate a part of South Asia to the growing economies of East Asia.

Besides, South Asian landscape namely: the eastern sub-region of Bangladesh, Bhutan, India and Nepal (BBIN); the southern sub -region of India, Maldives and Sri Lanka (IMS); and the western sub-region of Afghanistan, India and Pakistan (AIP). Bangladesh, by virtue of a large population that gives it gravitas in the regional context, can now offer or participate in such programs like Bangladesh-India-Sri Lanka (BIS) and Bangladesh-India-China (BIC).

When such regional integration programs become fully operational, the north-south connectivity corridors will be more effectively available, enabling land-locked Bhutan and Nepal to more efficiently use Bangladeshi routes and ports. Coastal and maritime shipping agreements that were signed very recently also dramatically augment the other existing connectivity points and modes.

In contrast to other developed regions which have ageing populations like Japan and China, the South Asian region has a huge youth bulge that will continue to grow for the coming decade. This can be a huge asset, but only if the countries of the region seize the present opportunity to tap into the vast potential of regional economic integration. Policies and Researches are now necessary to utilize this demographic dividend effectively in Bangladesh.

Conclusion:

A nation’s economy stands on its regions’ economic sectors, their structures and efficient economic integration and performance. To ensure both local and international regional and economic integration to absorb the present opportunity, Government can seriously ponder over policy initialization and policy co-ordination mechanism. The state-of-art regional and economic integration policy will help Bangladesh to bring home much more foreign investments and economic cooperation that will boost bilateral trade relations with many nations. South Asia can become a powerful locomotive of global development. Bangladesh in one of the leading growing economies of South Asia. If it misses the present opportunity, it could fail to become Asian Tiger, the fastest growing economy in South East Asia.